Baozi: Building A Brand Development Model For Chinese Local Women'S Clothing

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Although "ancestral home" is Canada, but since Kenneth Chan led the Chinese market, Baozi "tailored" and found out a set of suitable.

Vertical integration under the preemptive advantage

After the war in China, the development of baozi can be roughly divided into two stages, with the landing of the Hong Kong Stock Exchange in 2003 as the dividing line.

Before listing, Baozi is basically in the primary stage of single brand, single fight, efforts to open up the market and establish brand awareness.

In this stage, Baozi strategically focuses on attack, takes the famous brand abroad as the main selling point, and takes advantage of China's fashionable consumption in the blank period. Relying on the precise market position and vertical integration mode, it builds a selling network in the prime locations of the first tier cities.

Similar to the opportunity for the rise of domestic independent brand clothing, the reason for Baozhuang's overall adjustment of brand strategy lies in the good economic environment of China at that time and the increasing purchasing power and desire of consumers.

More importantly, in the 90s of last century, China's high-end clothing brand was still in the neutral stage, and its own brand has just started. Today, the international brands that consumers are familiar with has not yet entered large-scale. China's clothing industry is at the stage of low-end mass production and primary product marketing, and brand awareness is still in the bud.

At this time, Baozi appeared on the image of a wholly foreign-owned enterprise and launched a branding operation to seize the opportunity of the market.

And between the high fashion and the ordinary clothing, the continuation of Baoji's original success in the workplace women's positioning, just to make up for the gap in the domestic market at that time.

In 1993, Kenneth Chan sold all 2 million pounds of British shop in China, and opened two retail outlets in Xiamen and Shanghai in 1994. By the end of 1995, the number of retail outlets in the country had already broken through 200. In the domestic market, Baozi took back to Canada's home in 2002, and opened four flagship stores in four cities in one year.

Rapid expansion also achieved its docking with the capital market in 2003.

In other words, Baozi in different places should adjust in accordance with the customs and needs of Chinese consumers, such as changing the clothing version and adding washable fabrics to facilitate cleaning and maintenance.

At the same time, to create a localized vertical integration business mode, relying on the aura of "famous foreign clothing brands", and fully enjoying the advantages made in China.

In addition to the licensing of sunglasses, all the products bearing the label are produced and processed at the factories in Xiamen, and are distributed to retail outlets throughout the country after arriving at the warehouse.

The trinity of design, manufacturing and sales is not only conducive to ensuring product quality, but also can achieve rapid response in the supply chain, ensure timely supply of products, and effectively reduce the initial production cost of the products, so that baozi has a higher profitability. In 2004 and 2008, Baozi's net profit rate is 18.6% and 28.3% respectively, while Burberry (Burberry) and Hugo Boss are the brands that produce business outsourcing, and the net profit margin of the same period is between 6.6-13.8%.

Vertical integration is now widely used by local clothing brands, especially high-end women's clothing.

Brand image is the driving force of endogenous growth.

After ten years of market cultivation, Baozi has occupied an important part of China's high-end women's clothing brand, and its rapid growth and profitability have also been affirmed by the capital market.

Subsequently, Baozi shifted to defend and slow down in the construction of the main brand.

However, whether it is the "attack" or the "Shou" period, constantly strengthening the image of high-end brand women's wear is the aim of baozi's implementation: about 4% of the group's annual retail income is covered by magazines, outdoor advertising, star sponsorship and various promotional activities.

Outside the advertising campaign, Baozi's "demanding" for the location of the store (cabinet) and the creation of the "baozi 1961" brand have played a key role in maintaining and enhancing the brand image of baozi.

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Shop location lock-in core business circle

Baozi group's financial report shows that good geographical location is the first requirement for its long-term development strategy.

In fact, the choice of terminal location has always been one of the key points of baozi's management.

In the early days of entering the market, Baozi will deliberately choose the surrounding areas of colleges and universities to attract and cultivate potential buyers of brands.

Today, Hongkong Peninsula, Beijing Seth, Shanghai Meimei, The Garden Hotel and Shenzhen 75-250 square meters of berths are still the first choice of baozi, which are not only in line with their high-end positioning, but also the frequent occurrence of the actual and potential consumers of the brand.

In order to ensure the long-term geographical advantages of the retail terminals, Baoji followed the pace of China's rapid economic development and began upgrading and adjusting the old stores since 2005.

In addition to launching a fifth generation image store similar to Shanghai's new world, the store has shut down its stores with poor performance or has already left the core business circle, or has moved the old shops to the new high-end department stores.

In 2005, the growth rate of Po's retail channel dropped from 9% for many years to 6%, and in 2006 it was 8%.

In 2007, Baozi's store upgrade operations were more radical, closing 72 stores in second tier cities and opening 75 new branches.

In 2008, the two figures changed to 80 and 60 respectively.

In the 2003-2009 years, the 40 shops of baozi net increase increased by 14%.

The adjustment of shops is not only conducive to maintaining the brand image of high-end clothing for a long time, but also contributes to the scale of single store sales.

"Baozi 1961" promotes overall positioning

In fact, Baozi's "international brand" has always been questioned by all parties.

After all, despite the fact that Baoji, who was in the hands of the founder, was once in the streets of the United States and Britain, but after bankruptcy, all overseas businesses came to an end at the beginning of their entry into the Chinese market.

The creation of "baozi 1961" seems to be a chip for Kenneth Chan to reopen the European and American markets and aim for more high-end customers.

"Baozi 1961", the creative director of Tia Cibani, has hired managers and production experts who have worked in high-end brands such as Coach and Michael Kors, and has been playing a high role since the beginning. "Tia Cibani"

At the point of distribution, they entered more than 60 retailers, such as luxury department store Saks and Neiman Marcus, and opened the first American store in Fifth Avenue in early 2009. In brand marketing, "baozi 1961" used the geographical advantages to sponsor Hollywood stars frequently. In 2006, it became a brand sponsor of the movie devil wearing Prada and installed for the heroine.

The fashion press conference in New York also appears from time to time. Even on the independent website of "baozi 1961", there is a special page showing a collection of pictures of stars dressed in baozi 1961.

After a series of high-profile moves, since the official landing in the US market in 2005, the international exposure rate of "baozi 1961" has indeed improved, and its implication for the psychology of domestic consumers can not be underestimated.

Meanwhile, Baozi also admitted in the annual report that compared with improving international reputation, enhancing the status of baozi brand in the domestic consumer's mind is a more important function of baozi 1961, in order to keep baozi's leading position in the domestic market and make it more competitive than other international brands entering the Chinese market.

Moreover, because of the "fruitful" strategy, Baozi will further increase the exposure rate of "baozi 1961" overseas.

Although "baozi 1961" has laid a solid foundation for baozi's continuous development in the domestic market remains to be verified by time, but a fact that is easier to observe is that its brand development is quite good. At present, it has 13 stores in six cities of Beijing, Shanghai, Guangzhou, Hangzhou, Shenyang and Xi'an, while the number of retail terminals in the United States has reached 79, and the total number of stores in 10 countries is 177.

From this perspective, "baozi 1961" has formed complementary advantages with the main brand, and the two have jointly occupied a larger market share.

Discount store digestion inventory

In the high-end clothing industry, high inventory turnover days are more common in itself, while the vertical integrated business mode and single product line of baozi make their inventory turnover days higher than those of Burberry, Dior and other brands. Since 2003, there has been a marked upward trend. In 2008, under the stimulation of the financial crisis, the number of inventory turnover days increased from 300 days a year ago to 448 days, reaching 579 days in the first half of 2009.

Coupled with the long standing and no discount attitude to create a high-end brand image, the company's digestion of inventory is slower than other brands. Therefore, higher inventory has been a hidden worry for baozi for a long time.

In this regard, in the past two years, Baozi has adopted the common method of international high-end brands: opening discount stores to digest inventory, and set up 5 discount stores in the first half of 2009, bringing the total number to 7, and plans to open two new businesses in the second half of the year.

The intention of baozi is that discount stores can attract some new customers who can not afford the original price of baozi, while reducing the inventory level and speeding up the return of funds.

The painstaking practice of brand image has consolidated and strengthened the bargaining power of baozi to a large extent, and the price of baozi's products has been raised almost every quarter. The annual increase of the average selling price of products is usually higher than that of the current year's inflation rate of about 3-5 percentage points. This has enabled baozi to have a strong endogenous driving force. The growth of single store sales has been climbing up to two digits since 2003, even when the external economic environment is relatively poor in 2003 and 2008, the growth of single store sales has also reached 20% and 18.9% respectively.

In particular, since 2005, Baoji has slowed down the speed of newly opened stores. The growth of sales revenue and the continuous improvement of gross profit margin rely more and more on the growth of single store sales brought by the increase in prices.

However, although this characteristic of baozi is in line with the customary driving force of high-grade brands, high gross margin and balanced growth, it also shows that after more than 10 years of rapid growth, the growth of baozi will inevitably encounter bottlenecks to a certain extent.

In the two or three tier cities that benefited most from the urbanization process, because of the limited customer consumption ability and the department store operation and grade, the channel terminal construction of baozi was relatively slow.

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Transformation brand management

With the pformation of the main brands, Baozi gradually began to pition from single brand operation to multi brand pformation.

Obviously, the risk of single brand operation is high, and multi brand integrated operation can not only disperse risks, but also achieve synergy and economies of scale by sharing management teams and channel platforms.

For baozi, on the one hand, with the international famous brands, in addition to playing the local manufacturing and channel advantages accumulated by baozi for many years, it can enhance the brand image of baozi itself, learn the operation ideas of foreign brands and improve the overall management level; on the other hand, as the main brand enters a relatively mature stable growth period, Baozi needs to find new profit growth points.

Judging from the current actions, Baozi has completely opened up the pformation from a single brand owner to a brand management company.

In 2000, Baozi was authorized by BMW to act as a distributor of BMW apparel brand in China, responsible for product design, production, marketing and so on. At the same time, men's clothing, bicycles and a small number of accessories were produced on OEM to supply the latter's overseas market.

Using the mature sales channels built in the mainland market in the early years, BMW brand stores are generally located in the vicinity of Baozhuang franchised stores, a main commercial and business casual wear, a main sportswear and leisure dress, a fully managed women's clothing, a men's and women's wear and men's wear, and a good complement to the product style and product mix.

In 2001, the first BMW brand clothing store opened in Beijing. In the second half of 2004, BMW's clothing agency business first achieved balance of payments. In those days, only one OEM production brought 36 million yuan revenue to Baozhuang, an increase of 208% over the previous year.

In the same year, BMW clothing, which has experienced 3 years of market cultivation, has established its own popularity in the market. It has begun to be recognized by consumers, and the number of stores has reached 17. By the middle of 2009, this figure has been refreshed to 42.

Starting from the official profit in 2005, BMW apparel's contribution to baozi's retail revenue has increased from the initial 7% to the current 10%, with sales revenue increasing at an average annual rate of 70%.

In 2008, the average selling price of BMW's clothing products increased by 30%. Although its relative base was small, the gross margin level was almost the same as that of baozi brand, thus becoming a major driving force for the company's growth.

While increasing its brand, Baozi also began to improve the proportion of accessories in the product structure.

Compared with the Raulf Lauren, Burberry and Escada, which has declared bankruptcy of the German women's clothing brand Escada and other international brands accounting for about the total income of the total income of 7-27%, the contribution of baozi's accessories to sales is less than 5%.

Sunglasses, wallets and other accessories are not only relatively inexpensive, they can serve as entry-level products to attract more consumers, but more importantly, the sales cycle of accessories is usually longer than that of clothing, and the gross profit margin of handbags products can be as high as 90%.

Obviously, the rich product line will play an important role in improving the profitability of baozi.

In 2007, Baozi opened a special accessory shop in Beijing to sell handbags.

In the same year, with the renewal of the licensing agreement with BMW for 3 years, products other than clothing such as leather goods, spectacles and watches were also joined in the authorized production.

With the successful experience of BMW brand, Baozi has successively joined hands with Armani, Vivienne Tam and Ferrari to further implement its own multi brand strategy.

In March 2008, Baozi signed a non exclusive distribution agreement with Armani, distributing three brands of Armani Collezioni, Emporio Armani and Armani Jeans in China. In October 2008, the first distributor opened in Xiamen.

Keeping up with it, in June 2008, Baozi and Vivienne Tam group set up a joint venture to distribute and promote Vivienne Tam brand in the mainland. Among them, Baozi accounted for 58% of the total.

In the first quarter of 2009, Baozi signed an exclusive retail distribution license with Ferrari for 15 years, hoping to replicate the successful experience of BMW apparel again on top sports car brands.

In addition, Baozi also joined Cerruti 1881 in setting up a special menswear market in the mainland and opened a Menswear store in Beijing Financial Street shopping center to provide a full set of customized services.

In addition to brand cooperation, Baozi once discussed with Prada the purchase of its brand Jil Sander, though it was ultimately unable to succeed because of price reasons, but it also showed the determination of baozi's multi brand pformation.

At present, in addition to "baozi" and "baozi 1961" two women's wear brands, Baozi also manages the above four brands (there is also a Maxmara store), each has a clear market positioning and unique style, such as Vivienne Tam is also dominated by women's clothing, but compared with baozi, the fashion is higher, the style is more romantic, and the price is between 3500-4000 yuan. This layout will directly play a role in increasing the number of consumers and expanding the market share for baozi (Table 2).

In its 2009 semi annual report, Baozi said that the multi brand management strategy has achieved initial success, among which Baozi and BMW clothing have gained a higher profit margin, and several other new brands are still in the initial stage of trial.

However, due to the need for brand building, there is still uncertainty in the future. In the short term, the contribution of new proxy brands will be very limited.

At the same time, the marketing and management of many brands also put forward higher requirements for baozi's management ability.